OECD recommendations to boost the Latin American economy

30/11/2009 - Latin America as a whole is showing signs of recovery and stabilization. Economic activity is helped by improving conditions in global financial and commodity markets, as well as recovering exports. It is also underpinned by the stronger policy frameworks developed during the past decade, which have promoted resilience and allowed the implementation of timely responses to counter the crisis. Yet several medium-term features of the Latin America region still cast a shadow over the strength of the coming recovery. Combating poverty and reducing inequality remains a top priority. Many countries continue to struggle with scarce investment, low productivity, dependence on volatile commodity prices and slowing migrant remittances.

According to OECD Secretary-General Ángel Gurría, "The year 2010 will be critical for Latin America. It will be a “recovery year” and the decisions taken in that phase will craft the future of these countries. The crisis has opened an extraordinary window of opportunity to promote the needed reforms to address pending structural challenges. Governments have to gear their recovery plans to strengthen poverty reduction programs, but also to address their long-term challenges in fields like education, innovation, competition, corporate governance, infrastructure, green energy and the rule of law. Latin America needs policies with short term impact and long term vision." Read the full speech here (available only in Spanish).

The Latin American Economic Outlook 2010 focuses on international migration and remittances - the flow of people, money and ideas - that can benefit all countries. It encourages origin and destination countries to work together to curb unemployment and promote development.

Support legal migration for workers according to their skill. Governments should continue to adjust policies with a view to facilitate legal migration and to help meet labour needs.

Extend social protection to Latin American migrants. Only 15% of Latin American immigrants are covered by social security agreements between origin and destination countries. The extension of social protection to more Latin American migrants is an immediate challenge. Ratification and quick implementation of the Convenio Multilateral Iberoamericano de Seguridad Social and the United States-Mexico Social Security Agreement are important first steps in this direction.

Encourage remittances to boost economic development. More monitoring increases the prospects that remittances flows are channeled into productive investment and ultimately benefit development. This demands important shifts in the quality of the rating system, particularly in Central America and the Caribbean. These countries also need to develop frameworks that provide adequate incentives for migrants to send remittances through formal channels. This could be done by learning from the experience of Mexico and its Tres por Uno programme.

Decrease the cost of transferring remittances. OECD work shows the benefits of reducing transfer costs. Notably, a 1% reduction in transfer charges is seen to increase the actual amount of remittances by as much as USD 800 million. More competition is needed to decrease charges. The diffusion of mobile phone payments could also help.

Published for the third consecutive year, the Latin American Economic Outlook features three parts: a macro-economic analysis of trends in the region; a focus on migration trends and remittances flows; and country notes on eight Latin American economies: Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico and Peru.

Watch video interview with Jeff Dayton-Johnson, senior economist and coordinator of the annual Latin American Economic Outlook. Mr. Dayton-Johnson talks about the economic, migration and remittances flows trends for the region in 2010.